Assess your purchasing processes to stir up incremental savings

Creating memorable guest experiences while maximizing operational efficiencies is a constant balancing act for asset managers, especially those operating full-service hotels with restaurants. Today’s chefs and food-and-beverage directors are adding flair to traditional menus not just to create experiences and drive loyalty, but also to boost occupancy and increase revenue per available room for the hotel. So, while kitchens focus on creating the trendiest menus, hotel purchasing departments should focus on sourcing now-in-demand products at the best prices. Knowing when to buy and how much is just as critical as what to buy and from whom.

Even the most well-coordinated purchasing programs can hit a snag, especially when last-minute menu changes are requested by a group or a health epidemic raises beef or poultry prices without warning. One way to ensure that an asset is performing consistently and improving profit margins continually is for the purchasing department or its procurement-services provider to take a deep dive and assess its distribution channel processes. Oftentimes they will discover that many of the products routinely bought can be purchased much cheaper from other suppliers with the proper disciplines.

Here are a few cases in point:

  • Bacon is an in-demand high-spend product. Buying it last minute from a local, specialty distributor can significantly impact food costs. When incorporating products like bacon to the menu, it pays to source from channel partners that are leveraging volume. During a recent distribution-channel audit, a property discovered that it could buy a similar hardwood-smoked bacon through its master food distributor at 27.5 percent less cost than the hotel was paying from its preferred specialty vendor.
  • Canola oil is a kitchen staple. During a routine distribution-channel audit, a purchasing team found that it could save 21 percent on this commodity purchase by buying through the master food distributor versus the hotel’s specialty goods supplier.
  • Emergency orders are a reality of operations. However, just because a specialty vendor can fire up a truck and have product to your property in 30 minutes does not mean that this practice should become a habit because of order convenience. Regional distributors (meat, poultry, seafood, produce) do an excellent job in their respective service of goods. Let regional distributors focus on their specialty and avoid buying value-add items that typically tend to cost more such as French fries, olive oils, condiments and other commodity-type goods that are leveraged through broadline distributors at lower prices.

While these individual product savings may not seem significant, combined they could potentially total $80,000 to $240,000 annually depending of the volume of the operation. Part of a deep-dive assessment can also mean finding alternative food items of the same quality. It may require the purchasing and F&B teams to sample several products before a substitute can be found. It will also put more pressure on the purchasing team to plan and better manage periodic automatic replenishment levels, but the cost savings is significant over time.

There are certain ingredients that no hotel kitchen can go without, so don't let those run low. Photo credit: Getty Images/scyther5

Managing PAR Levels

One of the first signs of improper PAR level management is when storeroom, cooler and freezer inventories are loaded up. Typically, distributor partners can deliver product frequently and there is no need to have three to four days of inventory on hand. Turning inventories more frequently will equate to products that maximize quality, reduce spoilage/waste and can deter associate pilferage, too.

While emergency purchases can’t be foreseen, last-minute orders should be the exception rather than the rule. There is no excuse for a lack of planning and PAR-level control. Strengthening forecasting and production calculations reduces over-ordering and over-production. By requiring associates to produce food due to a more systematic process, there should be less waste and people dependencies related to guessing games can be eliminated.

Furthermore, proper forecasting means raw materials can become trackable and more predictable. Chefs can use the forecast as a check-and-balance system for incoming requisitions. This will strengthen PAR level preparedness and reduce unnecessary inventory.

Proper PAR level management brings:

  • Significant improvements to bottom line
  • Operational efficiencies
  • Greater process dependencies for inventory management
  • Improved inventory turns to maximize product quality
  • Decrease in working capital

Asset managers would be well-advised to conduct a deep-dive assessment of their distribution-channel processes, or request one from their procurement services provider. Not only will they uncover opportunities to improve profitability, but it will surely create operational efficiencies between the asset’s F&B and purchasing teams.

As director of Avendra’s consulting services, Cory Dellinger has supply chain management experience with specialized knowledge in international seafood procurement.